Business Tax Advocacy (In-Depth Analysis Article)
Do trade associations and other business interests advocate effectively on tax issues? This is a question raised by many in the tax policy community when discussing the positions adopted by business in tax debates. Essentially, these tax policy analysts are trying to determine why businesses would oppose proposals that the analysts believe would benefit business and the economy over the long-run. For these observers, an obvious potential answer is that the business community does not know what is good for them because tax law and the economics of tax policy are complicated. In this article, I argue that this conclusion is mistaken and that there are other, valid reasons why business interests in general, and home builders in particular, are wary of certain comprehensive tax reform proposals.
As a recent example, in November 2005, the President’s Advisory Panel on Federal Tax Reform released its report, which recommended significant changes to the nation’s tax system. Among its proposals, the Panel recommended that the present-law mortgage interest deduction should be transformed. The Panel would repeal the existing deduction in its entirety, including the deductions for second homes and home equity loan interest, and replace the provision with a more limited 15% credit for certain amounts of mortgage interest paid on first home debt only. The National Association of Home Builders (NAHB) strongly opposed this proposal and other recommendations made by the Panel. NAHB argued that the proposal would overturn the established Federal policy commitment to homeownership by reducing the values of homes and hurting the wealth of homeowners, particularly recent homebuyers. NAHB was joined in its opposition by members of Congress and other housing-related organizations.
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